Reports Record Quarterly Royalty Revenues and
Cash Balance
TORONTO, Aug. 9, 2017 /CNW/ - AuRico Metals Inc. (TSX:
AMI),("AuRico" or the "Company") today reported its financial
results for the second quarter. For complete details of the
Financial Statements and associated Management's Discussion and
Analysis for the quarter ended June 30,
2017, please see the Company's filings on SEDAR
(www.sedar.com) or the Company's website (www.auricometals.ca). All
amounts are in US dollars unless otherwise indicated.
Recent Highlights include:
- Record royalty revenue of $2.8
million, an increase of 39% compared to Q2 2016;
- Revenue for the quarter was positively impacted by record
second quarter gold production of 77,069 ounces from the
Fosterville mine and 47,300 ounces
from the Young-Davidson mine;
- Annual royalty revenue guidance has been revised upwards for
the second time in 2017, to a range of $10.5
to $11.0 million;
- Future royalty revenue will be positively impacted by the
significant 110% increase in gold ounces within Mineral Reserves at
the Fosterville Mine;
- The Company reported a record cash balance of $21.2 million at June 30,
2017;
- Signed an Impact Benefits Agreement ("IBA") for the Kemess
Underground Project with the Tse Key Nay First Nations;
- Released a positive Preliminary Economic Assessment ("PEA") for
the Kemess East project which displayed robust economics including
a pre-tax NPV of C$670.0 million
(22.1% IRR) and an after-tax NPV of C$375.0
million (16.7% IRR); and
- Completed a $3.8 million
(C$5.0 million) Canadian Exploration
Expense ("CEE") flow-through financing to fund ongoing exploration
at Kemess East.
Commenting on the results, Chris
Richter, President and CEO of AuRico Metals stated; "Over
the first half of 2017 we reached a number of key milestones at
Kemess, including the receipt of our EA Certificate for Kemess
Underground, the signing of an Impact Benefit Agreement with our
First Nations Partners, and the release of a positive PEA on Kemess
East. I am proud of the progress the team has made in achieving
these milestones and increasingly highlighting Kemess as a stand
out, advanced stage, development opportunity in a top jurisdiction.
We look forward to pursuing further value creation through our
ongoing efforts on detailed engineering, permitting, and Kemess
East drilling which will feed into an integrated Feasibility Study
on Kemess Underground and Kemess East. With regards to our royalty
portfolio, we are very excited about the significant increase in
its value over the first half of the year, not least as a result of
the growing reserves and expanding production at Fosterville. The success at Fosterville underscores the high quality
nature of our royalty portfolio."
Near-Term Corporate Objectives
The Company's key near-term objectives include:
- Release results of 2017 Kemess East drill program (Q4 2017),
and updated Kemess East resource estimate (Q1 2018);
- Progress permitting and detailed engineering for the Kemess
Underground project ahead of a potential decision to commence early
construction activities (H1 2018);
- Advance integrated Kemess Underground and Kemess East
Feasibility Study (mid-2018);
- Evaluation of funding alternatives for the potential
development of the Kemess Underground project (ongoing).
2017 Outlook
AuRico Metals' goal is to deliver sustained value creation for
the Company's many stakeholders. We will look to continue to create
shareholder value by advancing the Kemess Underground project, by
advancing the Kemess East project, by completing an integrated
feasibility study, and by enhancing the value of our royalty
portfolio.
The section below contains forward looking information; please
refer to the Company's cautionary note regarding forward looking
statements. The Company is providing the following revised guidance
for 2017, assuming a 0.75 CAD to USD
exchange rate and $1,250 per ounce
gold price:
|
|
|
(in
millions)
|
August 2017
Guidance
|
May 2017
Guidance
|
|
|
|
Royalty revenues
(pre-tax)
|
$10.5 to
$11.0
|
$9.5 to
$10.4
|
|
|
|
General and
administrative expense, excluding stock-based
compensation
|
$3.0
|
$3.0
|
|
|
|
Care and maintenance
expense
|
$4.0
|
$4.0
|
|
|
|
Powerline brushing
campaign
|
$1.5
|
-
|
|
|
|
Kemess Underground
capital expenditures
|
$6.0 to
$7.0
|
$5.5 to
$6.0
|
|
|
|
Kemess East capital expenditures
|
$4.0
|
$4.0
|
Royalty revenue guidance has been increased for the second time
in 2017, due to another increase in production guidance at
Fosterville. The guidance range
disclosed in the table above is based on the following guidance
ranges provided by the operators:
|
|
|
|
Asset
|
Royalty
|
Guidance
Low
|
Guidance
High
|
Young-Davidson
|
1.50%
|
200,000
|
210,000
|
Fosterville
|
2.00%
|
250,000
|
260,000
|
Hemlo*
|
0.25%
|
205,000
|
220,000
|
Eagle
River
|
0.50%
|
45,000
|
49,000
|
* Company guidance assumes that 75% of production at
Hemlo will be from the Williams
mine.
The Company has committed to conduct a $1.5 million powerline brushing campaign on its
wholly owned powerline between Mackenzie and Kemess during the
second half of 2017. During Q2 2017, a powerline treatment
assessment was conducted and areas were identified that require
vegetation removal. This expense was included in the Company's
Kemess Underground Feasibility Study cost estimate, but has been
brought forward to reduce the risk of an outage or fire caused by
growth underneath the Company's powerline. Powerline brushing
will be included in care and maintenance expense on the Company's
Consolidated Statement of Comprehensive Income.
The Company has increased its Kemess Underground capital
expenditure guidance from $5.5 to
$6.0 million to $6.0 to $7.0 million. This increase is due
to accelerating detailed engineering on project year 1 and 2
(currently 2018 and 2019) capital items in order to get an advance
start on tendering these contracts. While the Company is working on
tendering packages, the awarding of work will be dependent on an
attractive financing alternative, and approval by the Company's
Board of Directors.
Operations Update
Kemess Underground
The Company is currently preparing the necessary permit
applications that would allow for the construction and operation of
Kemess Underground. It is anticipated that these permit
applications will be submitted during Q3 2017. The permitting
process is anticipated to be completed in Q2 2018.
During the first quarter, the Canadian Environmental Assessment
Agency ("CEAA") issued a positive Decision Statement and the
British Columbia Environmental Assessment Office ("EAO") granted an
Environmental Assessment Certificate for the Kemess Underground
project.
Earlier this year, the Company announced the addition of two
project managers to the Kemess Underground project team, a Mining
Project Manager and a Surface Construction Project Manager. Both
new hires bring a wealth of experience to the Company, both in
technical knowledge of panel caving and surface construction, and
experience in British
Columbia.
In May 2017, the Company announced
the signing of an IBA for the Kemess Underground project with
Takla Lake, Tsay Key Dene and Kwadacha, collectively
Tse Key Nay ("TKN"), an alliance of
three Sekani First Nations.
The IBA provides a framework that formalizes the long-term
cooperative relationship between the Company and the TKN First
Nations over the life of the project. The IBA captures the
mutual commitment to consult and maintain an open, respectful and
cooperative relationship throughout the development and operation
of the Kemess Underground project. The IBA further provides
for meaningful TKN participation in Kemess Underground through
training, employment, business opportunities, environmental
protection and other means.
In anticipation of all required construction and operating
permits being received in Q2 2018, detailed engineering is in
progress with a focus on access corridor construction related
activities which are expected to account for the first twelve
months in the construction schedule. The access corridor includes a
road from the Kemess South site to the location of the triple
decline portals that will be used to access the Kemess Underground
orebody. Additional activities include a 0.9 kilometre access
tunnel, laydown areas, and camp refurbishment activities. The
Company is also progressing detailed engineering on its water
discharge system.
Tender documents related to initial construction activities are
planned to be issued to contracting companies in Q3 2017.
Kemess East
On May 29, 2017, the Company
announced the results of a PEA on the Kemess East
project.
The Company is currently conducting an approximately 12,000
metre drill program at Kemess East with 2 drill rigs currently
active on the property. This program will include infill drilling
targeting the potassic strong zone, expansion drilling on the outer
edges of the known deposit and exploration holes testing the Kemess
Offset Zone. The Kemess Offset Zone is located between the Kemess
Underground and Kemess East deposits, which are one kilometre
apart.
Kliyul
On March 17, 2017, AuRico entered
into a binding Letter Agreement with First Quantum Minerals Ltd.
("First Quantum") on the Kliyul property, located in British Columbia, approximately 50 km south of
AuRico's Kemess property. Under the terms of the agreement,
First Quantum has 12 months to evaluate the Kliyul project.
It can then choose to enter into an Option to earn a 51% interest
by incurring a minimum of C$5 million
of expenditures on the project prior to December 31, 2021. First Quantum's interest
will increase by a further 29% (80% total) when a decision to mine
is made. Upon a decision to mine, AuRico will be entitled to
receive advance royalty payments of C$2
million per year until the commencement of commercial
production, and will retain a 0.5% NSR royalty once production
commences.
Royalties
During the three months ended June 30,
2017, the Company recognized revenues from the following
royalty assets:
|
|
|
|
|
|
($ in
millions)
|
Fosterville
|
Young-Davidson
|
Hemlo*
|
Eagle
River
|
Total
|
|
(2%
NSR)
|
(1.5%
NSR)
|
(0.25%
NSR)
|
(0.5%
NSR)
|
|
Q2 2017
Revenue
|
$1.7
|
$0.9
|
$0.1
|
$0.1
|
$2.8
|
Q1 2017
Revenue
|
$1.1
|
$0.8
|
$0.2
|
$0.1
|
$2.2
|
|
YTD
Revenue
|
$2.8
|
$1.7
|
$0.3
|
$0.2
|
$5.0
|
|
|
|
|
|
|
Operator's
Production
|
Fosterville
|
Young-Davidson
|
Hemlo*
|
Eagle
River
|
|
(in
ounces)
|
|
|
|
|
|
Q2 2017
Production
|
77,069
|
47,300
|
42,000
|
10,597
|
|
Q1 2017
Production
|
46,083
|
40,400
|
54,000
|
13,588
|
|
|
YTD
Production
|
123,152
|
87,700
|
96,000
|
24,185
|
|
* Note that the Company's royalty is on the Williams mine at
Hemlo.
Recent royalty portfolio highlights include:
- On August 8, 2017, Kirkland Lake
Gold Ltd. ("Kirkland") reported additional high-grade drilling
results at Fosterville, including
338 gold grams per tonne over 33.6 meters (estimated true width of
4.6 meters). Kirkland's drilling
program continues to infill and target down-plunge extensions of
the Swan Zone of the Lower Phoenix gold system to increase Mineral
Resource confidence and assess the potential of further Mineral
Reserve expansion
- On August 3, 2017, Alamos Gold
Inc. announced record gold production of 47,300 ounces at
Young-Davidson during the quarter, 11% higher than
the same period of 2016 and 17% higher than the first quarter of
2017. Strong production has continued into July, with higher
underground grades driving gold production to a new monthly record
of approximately 20,000 ounces.
- On August 2, 2017, Kirkland revised its 2017 full-year guidance
for Fosterville, increasing
production guidance to 250,000 – 260,000 ounces compared to the
previous 200,000 – 225,000 ounces.
- On July 27, 2017, Kirkland announced that updated underground
Mineral Reserves at Fosterville
grew 110% to 1,030,000 ounces of gold, after depletion, from the
previous estimate of 490,000 ounces of gold at December 31, 2016. The main factor
contributing to the significant growth in ounces is an 83% increase
in the underground Mineral Reserve grade, to 17.9 gold grams per
tonne.
- On July 9, 2017, Kirkland announced record quarterly gold
production at Fosterville of
77,069 ounces at an average mill grade of 17.2 gold grams per tonne
and record recoveries of 94.7%.
- On May 31, 2017, Wesdome Gold
Mine Ltd ("Wesdome") announced that it had completed development on
the 844 metre level in the 300E Zone. Development of the 844
metre drift has identified subzones with a combined strike length
of 174 metres, width of 2.85 metres and average grades of 22.62
gold grams per tonne. In comparison, the Q2 2017 head grade
at the Eagle River mine was 9.8 gold grams per tonne. Wesdome
expects to produce ore from the 300E Zone by the end of 2017.
About AuRico Metals
AuRico Metals is a mining development and royalty company with a
100% interest in the Kemess property in British Columbia, Canada. The Kemess property
hosts the feasibility-stage Kemess Underground Gold-Copper project,
the Kemess East exploration project, and the infrastructure
pertaining to the past producing Kemess South mine. AuRico's
royalty portfolio includes a 1.5% NSR royalty on the Young-Davidson
Gold Mine and a 2% NSR royalty on the Fosterville Mine, as well as
a portfolio of additional producing and pre-production royalty
assets located in North America
and Australia.
Cautionary Statement on Forward-Looking
Information
This press release contains forward-looking statements and
forward-looking information as defined under Canadian and U.S.
securities laws. All statements, other than statements of
historical fact, are, or may be deemed to be, forward-looking
statements. The words "expect", "believe", "anticipate", "will",
"intend", "estimate", "forecast", "budget" and similar expressions
identify forward-looking statements. Forward-looking statements
include statements related to the Company's outlook and key
deliverables for Kemess over the next year. These statements
are based on a number of factors and assumptions that, while
considered reasonable by management at the time of making such
statements, are inherently subject to significant business,
economic and competitive uncertainties and contingencies.
Known and unknown factors could cause actual results to differ
materially from those projected in the forward-looking
statements. Such forward-looking statements and the factors
and assumptions underlying them in this document include, but are
not limited to:
- Royalty revenue guidance may be impacted by the performance of
the Young-Davidson, Fosterville, Hemlo and Eagle
River mines. Management has based its revenue
assumptions on the latest guidance provided by the operators of
these assets, but there is uncertainty as to whether operators will
achieve stated production guidance. Royalty revenue is also
based on an assumed gold price of $1,250 per ounce. The Company's gold price
assumption may be inaccurate; every $50 change in gold price assumption impacts
pre-tax revenue by approximately $0.3
million.
- General and administrative expense guidance may be impacted by
changes in foreign exchange rates, the integration of Kiska,
employee relations, litigation, time spent by officers and
employees on general and administrative activities, and business
opportunities that may be pursued by the Company.
- Care and maintenance expense guidance may be impacted by
changes in foreign exchange rates, employee relations, electricity
rates in British Columbia, weather
in the region surrounding the Kemess site, equipment reliability,
extent of powerline brushing required, if any, to optimally
maintain the powerline, quality of service received by vendors and
consultants, and the price of consumables.
- Kemess underground capital expenditures are at the Company's
discretion and will be impacted by changes in foreign exchange
rates, the number of comments or questions raised by First Nations
partners and Government during the review of project permits,
additional studies required in order to address concerns raised and
the results of those studies, quality of service received by
consultants, optimization efforts by management, and credit market
conditions and conditions in financial markets generally.
- Kemess East capital expenditures will be impacted by changes in
foreign exchange rates, weather conditions, quality of service
received by consultants, and the extent of any additional drilling
conducted at Kemess East in 2017.
- The estimates, models and assumptions contained in the Kemess
Underground Feasibility Study, including planned production rates,
which may be impacted by changes in commodity prices and the
exchange rate between the Canadian dollar and US dollar from
assumed levels, estimated future production and cost of sales
forecasts meeting expectations, estimated labour and materials
costs being consistent with the Company's expectations, the
accuracy of current mineral reserve and mineral resource estimates
as contemplated by the Feasibility Study, the viability of Kemess
Underground including, but not limited to, permitting, development
and expansion being consistent with the Company's current
expectations, access to capital markets, including but not limited
to identifying financing options and securing partial project
financing for the Kemess Underground project, being consistent with
the Company's current expectations.
- The estimates, models and assumptions contained in the Kemess
East Preliminary Economic Assessment and Mineral Resource estimate,
including planned production rates, which may be impacted by
changes in commodity prices and the exchange rate between the
Canadian dollar and US dollar from assumed levels, estimated future
production and cost of sales forecasts meeting expectations,
estimated labour and materials costs being consistent with the
Company's expectations, the accuracy of current mineral resource
estimates, the viability of Kemess East including, but not limited
to, permitting, development and expansion being consistent with the
Company's current expectations.
The Company has made forward-looking statements relating to
corporate objectives and key deliverables over the next 12 months,
including permitting, timing of regulatory decisions relating to
permitting, progress on detailed engineering, the Company's ability
to fund forecasted cash shortfalls, the Company's ability to create
value for shareholders, sufficiency of working capital for future
commitments, the timing of the integrated Kemess Underground and
Kemess East Feasibility Study, ability and timing of a potential
development decision on Kemess Underground, and other statements
that express management's expectations or estimates of future
performance.
Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the
forward-looking statements contained herein. Such statements are
based on a number of assumptions which may prove to be incorrect,
including assumptions about: business and economic conditions;
commodity prices and the price of key inputs such as labour, fuel
and electricity; credit market conditions and conditions in
financial markets generally; development schedules and the
associated costs; ability to procure equipment and supplies and on
a timely basis; the timing and ability to obtain permits and other
approvals for projects and operations; the ability to attract and
retain skilled employees and contractors for the operations; the
accuracy of reserve and resource estimates; the integration of
Kiska, the impact of changes in currency exchange rates on costs
and results; interest rates; taxation; and ongoing relations with
employees and business partners. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required by applicable law.
Readers are cautioned that forward-looking statements are not
guarantees of future performance. All of the forward-looking
statements made in this press release are qualified by these
cautionary statements.
Other information
The technical information disclosed
in this press release relating to the Kemess Underground project,
Kemess East project and the Company's material royalty properties,
being the Young-Davidson and Fosterville NSR royalties, has
been approved by Mr. John
Fitzgerald, an officer of the Company, who is a qualified
person within the meaning of National Instrument 43-101.
SOURCE AuRico Metals